PQ1.
PQ2.
PQ3. Apply debit-credit rules to the following transactions entered into by Joy Tea Limited (JTL)
during December 2019;
(i) Started business with cash of 10,00.000
(i) Deposited 8,00,000 in bank
(iii) Paid office rent for December 2019 and January 2020 at the rate of Rs 20,000 per month in cash.
(iv) Purchased office furniture for 2,00,000 on credit. The amount is payable within three months
from the date of purchase.
(v) Purchased merchandise for Rs 5,00,000 on credit.
(vi) Paid Rs 50,000 towards advertising in cash.
(vii) Paid Rs 5,00,000 to the supplier of merchandise by issuing a cheque.
(viii) Paid Rs. 20,000 towards conveyance expenditure in cash.
(ix) Sold part of the goods for 7,00,000 on credit.
(x) Withdrew 1,00,000 from a bank for office use.
(x) Paid 5,000 towards telephone charges in cash.
(xii) Paid 2,000 towards electricity in cash.
(xiii) Paid Rs. 30,000 towards salaries in cash.
Management estimates that the value of the stock of goods at the end of the period was Rs. 3,00,000.
PQ4. Indicate the following items' nature (equity/asset/liability/income/expense). Write the amount
against each item in the debit or credit column depending on the nature of the item. Total the debit and
credit columns. The total of the debit column and credit column should agree. Classify assets and
liabilities in the balance sheet in current and non-current categories.
Aafreen Limited (AL): List of Items in the General Ledger as of 31 January 2010
Particulars Amount Nature Debit Credit
Equity as at January 1, 2010 6,00,000
Long-term loan 5,00,000
Furniture and fixtures 2,00,000
Vehicle 4,00,000
Office equipment 50,000
Sales 20,00,000
Purchases 16,00,000
Opening stock 2,00,000
Salaries 1,00,000
Freight inward 35,000
Freight outward 50,000
Travelling expenses 30,000
Conveyance charges 10,000
Electricity charges 10,000
Telephone expenses 5,000
Interest expense 5,000
Inspection charges 5,000
Receivables 10,00,000
Sundry creditors 8,00,000
Cash balance 50,000
Bank balance 1,50,000
Total
Also, Prepare the profit and loss account and the balance sheet assuming that the closing stock is
valued at Rs. 4,00,000 and assuming an income tax expense of Rs. 1,00,000.
PQ5. Classify the following items into equity, liquidity, asset, income and expenses, and indicate whether
the balances in the account are debit or credit.
Assuming that the stock in trade at the end of the period was valued at Rs.6,00,000 and the depreciation
for the period, amounted to Rs.65, Calculate the profit before tax for the period. Prepare the balance
sheet at the end of the period (ignore income tax)
Errors not detected by trial balance:
Matching of the debit side total and credit side total of the Trial Balance is not conclusive proof of the
correctness of the Books of Accounts. The Trial Balance fails to disclose errors that do not affect the
agreement of the Trial Balance. Following are examples of errors not disclosed by the trial balance:
1. Errors of omission: These comprise omission in recording a transaction or other event in books of
original entry. If only one aspect of the transaction is recorded, the partial omission throws the trial
balance out of an agreement.
2. Errors of commission: These pertain to incorrect recording of a transaction or other event in books of
original entry. For example, a purchase of 710,000 is recorded as a purchase of $1,00,000. If a recording
of a transaction is partially incorrect, it throws the trial balance out of an agreement.
3. Clerical errors: These errors relate to the posting of an entry in the wrong account with the correct
amount, and the correct side does not throw the trial balance out of the agreement.
For example, a credit purchase of 71,000 from Shyam is credited wrongly to the account of Shyam Lal.
4. Compensating errors: A compensating error is one that is counterbalanced by another error or errors
of the same amount either in the same account or other accounts. For example, the omission of posting
an entry of 71,500 on the debit side is compensated by underposting of 71,500 on the credit side.
5. Errors of principle: An error of principle arises by reason of a transaction being recorded in a
fundamentally incorrect manner. For example, the conversion of a temporary shed into a permanent
building is recorded as repair and maintenance of the building.
